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Idorsia is a UFO in the Swiss biotech world. The company was founded in 2017, when Actelion owners Jean-Paul Clozel and his wife Martine Clozel decided to sell the pharmaceutical group they founded in 1997 to US giant Johnson & Johnson for $30 billion. They held onto a portfolio of molecules still under development and founded Idorsia to work on the drugs.

“This history gives the company a unique profile,” said Michael Altdorfer, who leads the organisation Swiss Biotech. “Most Swiss biotech companies are spin-offs that grow organically over a long period and have less than 300 employees on average.” Conversely, Idorsia began with a startup capital of $1 billion provided by Johnson & Johnson, and already has 750 employees. The Basel-based company has also been publicly listed since it was created.

“Idorsia will market its first product soon, whereas its competitors usually take 10 to 15 years to reach that stage,” said Altdorfer. That’s because the company isn’t starting from scratch. “We were able to benefit from research and development abilities that we created over the span of 20 years at Actelion,” said Jean-Paul Clozel, who is also a cardiologist.

At Idorsia, the development of new drugs is an empirical process. The company has a library of 600,000 molecules. Each time medical research discovers the role of a receptor or an enzyme in triggering a disease, Idorsia reviews every one of its molecules to determine if one of them is able to block the action mechanism. “Since we don’t have a commercial division with a pre-established list of diseases that we need to find treatments for, we are free to go where innovation takes us,” Clozel said.

To assist in this gargantuan effort, the company uses artificial intelligence tools based on machine learning. “These tools make it possible for us to identify patterns within the gigantic quantities of data we generate, in order to establish correlations and causalities,” he said. Idorsia now has 10 molecules under development. The project that has garnered the most interest is a treatment for insomnia, currently in phase III of clinical trials, and set to be on the market in 2020.

“We are free to go where innovation takes us”

Jean-Paul Clozel, CEO of Idorsia

Three other drugs are also in phase III and could be launched on the market by 2021. One is for patients with Fabry disease, a rare genetic disease where the body isn’t able to break down a type of lipid. “Our treatment would penetrate tissues deeper than current drugs, which minimises the neuropathic pain that these patients suffer from,” said Clozel.

Another molecule being tested can treat ultra-resistant cases of hypertension. “Patients who would benefit from this drug are people who have already exhausted all treatment options but their blood pressure is still too high,” said Idorsia’s CEO. In the United States alone, between five and 10 million people are affected by this type of hypertension.

The third molecule is expected to allow people who have suffered a cerebral aneurysm to “return to their regular activities more quickly,” said Clozel. It works by keeping arteries open during the two months after the incident, which reduces the risk of a vasospasm. One-third of people who have had an aneurysm are at risk of this complication.

Idorsia is also working on less advanced drugs to treat lupus, acute coronary syndrome, nasal polyps and epilepsy.

Financially, Idorsia has a liquidity pool of 1.1 billion Swiss francs as of March 2019. Its stock valuation is currently about 3 billion Swiss francs. A series of partnerships with other pharma groups – such as Janssen Biotech, a subsidiary of Johnson & Johnson, and Roche – also guarantee revenue for Idorsia.

According to various analysts, however, the Basel-based firm could still burn through its funds too quickly.

“The amount of financing required to test a diversified pipeline could be challenging for a young company”

Jean-Paul Clozel, CEO of Idorsia

“While it’s true that Idorsia raised 505 million Swiss francs over a few days in July 2018, which is a sign that investors trust the company,” said Altdorfer, “phase III clinical trials are much more expensive than pre-clinical trials.” The expert believes that Idorsia could run out of cash relatively soon. This year, the company is expected to spend 570 million Swiss francs to carry out its projects. Last year, it recorded a loss of 386 million francs. “The amount of financing required to test a diversified pipeline could be challenging for a young company,” Clozel said in February this year.

But Idorsia has some advantages on its side. Deutsche Bank estimates that the revenue generated by the four molecules in phase III clinical trials could exceed 4 billion Swiss francs. Vontobel Bank gave a more conservative estimate, estimating the potential revenue at 2.6 billion Swiss francs. Vontobel fears that Idorsia’s flagship drug – to treat insomnia – will suffer from competitors that make generic sleep aids. Vontobel Bank also points out that there is already a similar treatment: Belsomra, developed by Merck.

Marketed in Japan, the United States and Australia, it has not yet been approved in Europe. And the market is immense: “More than 30% of the adult population suffers from insomnia, and 10% uses a product to help them sleep,” said José-Haba Rubio of the Center for Investigation and Research on Sleep at Lausanne University Hospital (CHUV).

Idorsia will also establish its own sales force, which should help to maximise the benefits of its scientific discoveries. To launch its insomnia drug, the company is planning a widespread promotion strategy. The campaign will target doctors, patient discussion forums and people who wear smart watches.

THE SLEEP DRUG IN TESTING PHASE

Despite its cheerless name, Molecule ACT-541468 is the most promising product in Idorsia’s pipeline. This insomnia treatment works by blocking orexin receptors. “Orexin, generated by neurons in the posterolateral hypothalamus, keeps us awake,” says José Haba-Rubio of the Center for Investigation and Research on Sleep at Lausanne University Hospital (CHUV). “So blocking its action facilitates falling asleep.”

This method has a significant advantage over traditional sleeping pills, according to Idorsia CEO Jean-Paul Clozel. “Sleeping pills work by reducing the speed at which the brain functions, so there’s more of a loss of consciousness than just sleep alone.” This new treatment would generate a drowsiness whose structure is closer to natural sleep, with different phases such as deep sleep and Rapid Eye Movement sleep. Another advantage: by blocking the action of orexins, there is less of a risk of addiction than with traditional sleeping pills.

Idorsia began recruiting 1,800 patients in June to conduct phase III clinical trials and hopes to publish the first results in late 2019 for a market launch in 2020. Phase II clinical trials, conducted on 360 adult insomniacs, showed that the drug makes patients fall asleep quickly and stay asleep for a normal amount of time, with few instances of waking up in the middle of the night. It also doesn’t cause sleepiness the next day. These trials were also conducted on 58 seniors, a demographic that often suffers from insomnia but doesn’t tolerate sleeping pills very well.

Analysts' advice

“A solid portfolio”

While Idorsia isn’t close to being in the black, it’s still an attractive investment. “The company has a management team and employees with many years of experience, and maintains close relations with two large pharma groups: Johnson & Johnson and Roche,” said Stefan Schneider, analyst at Vontobel Bank. It also has a solid portfolio of drugs, several of which are already in phase III clinical trials, as well as an advantageous financial situation, particularly as a result of its successful fundraising round in 2018.

But a word of caution: like Michael Altdorfer, Stefan Schneider worries about the speed at which Idorsia is burning through its financial reserves. “Its pipeline is too diversified and none of its drugs seem to have a true competitive advantage over market rivals at this time,” said the analyst. In other words, Idorsia’s financial resources could be used up before the company reaches its profitability threshold. This should be considered a warning for investors, despite the advances that the Basel-based firm has already made.

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